In November 2011 we carried out a hydraulic fracturing programme using a heli-frac crew on 10 new production wells on Pad 2 at the Lineynoye oil field. The fracture stimulation programme went according to schedule and wells are currently being brought into production. Initial indications are encouraging, however, it will take several more weeks to bring all of the wells online and allow them to clean up and achieve a sustainable rate.

Five additional wells, two on Pad 2 and three on Pad 1, will be fracture stimulated during January and February 2012 when a frac crew can mobilised to the field by winter road.

Current field production is about 2,500 bopd. Assuming the wells already brought back online maintain the expected rate of post-frac clean up achieved and the remaining wells come on at anticipated rates, production is expected to reach the guided target of 4,000 to 5,000 bopd by the end of Q1 2012.

Licence 61 – Arbuzovskoye Pilot Development Programme

The Pilot Production Design for the Arbuzovskoye oil field was approved by the Russian State Central Development Committee in November 2011. Procurement of the long lead items to construct a 10 km pipeline from the Lineynoye facilities to Arbuzovskoye and drill up to 14 new production wells in 2012 is already underway and pipeline production is expected to commence in 2H 2012. Arbuzovskoye contains 2P reserves of 13.2m barrels of oil according to independent reserve auditors Ryder Scott.

Licence 67 - Cheremshanskaya No. 3 well

Testing of the Lower Jurassic J14 interval which contains 8.6 metres of net pay has been completed. The well flowed naturally to the surface at a rate of 6 m3/d (38 bfpd), consisting of a light, high quality, low viscosity oil with an API gravity of 50 degrees, gas and water. This is understood to be the first natural flow ever achieved from this Lower Jurassic interval in the Tomsk Oblast. Sustained production has been achieved from this interval in other fields in this region following fracture stimulation.

The next phase of testing will focus on the primary Upper Jurassic J1-3 interval. The initial log interpretation indicated this interval to be water bearing, however, additional log and core interpretation indicates that it may contain up to 7.0 metres of net oil pay. The plan is to isolate the interval from the rest of the Upper Jurassic interval (J1-1 and J1-2) which have been interpreted to be oil bearing, and to get an independent test of the true saturation of this J1-3 interval.

Licence 67 – Ledovaya No. 2a well

The 2a well was spudded on 5 December 2011. The well is targeting oil in both the Lower Cretaceous and Upper Jurassic intervals. It is expected that the well will take approximately four to six weeks to drill to the target depth.

“We are pleased that the 10-well heli-frac operation at Pad 2 on the Lineynoye oil field has been completed and that all wells brought online so far are successfully producing oil while continuing to clean-up with encouraging initial indications. This, combined with the approval of the Arbuzovskoye Pilot Production Project, will ensure the continuation of our production growth in 2012 and beyond.

We are also delighted that testing of Cheremshanskaya has demonstrated the first natural flow of light oil ever recorded in the Lower Jurassic interval in the Tomsk Oblast. The focus of the testing programme now moves to the Upper Jurassic J1-3 interval where additional studies indicate that the interval may also be oil bearing.”

The information contained in this announcement has been reviewed and verified by Mr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for the purposes of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in March 2006. Mr. Francis holds a B.S. Degree in Geophysical Engineering and a M.S. Degree in Geology from the Colorado School of Mines. He has also graduated from the Harvard University Program for Management Development. He is a member of the American Association of Petroleum Geologists and the Society of Exploration Geophysicists. He has over 35 years experience in oil and gas exploration and development.

Forward Looking Statements

This announcement contains forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement. No statement in this announcement is intended to constitute a profit forecast or profit estimate for any period.

Glossary

API Gravity

The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water.

bfpd

barrels of fluid per day

bopd

Barrels of oil per day

km

Kilometres

MD

Measured depth

mmbbls

Million barrels

Spill point

The structurally lowest point in a hydrocarbon trap that can retain hydrocarbons